Southwest B.C.’s Investment Climate Declines

BC - Capital investment in industrial, commercial, and institutional infrastructure lays the foundation for business productivity and economic growth, and ignites long-term employment. While Southwest B.C. enjoyed many economic benefits from major project construction over the past few years, our region’s inventory of capital investment has been on a declining trend. Between the fourth quarter of 2016 (Q4 2016) and the fourth quarter of 2017 (Q4 2017), the total value of Southwest B.C.’s major projects dipped by 3 per cent to $69.7 billion.

According to CPABC’sRegional Check-Up report approximately 42 per cent of the total value of our region’s major projects are residential, and the majority of the projects are either under construction or in the proposal stage. Of the 279 proposed projects that are in B.C.’s major projects inventory at the end of 2017, there are 148 residential projects currently in the proposal stage worth approximately $10.0 billion. The five most valuable projects account for almost 45 per cent of the total value of all proposed residential projects and have been in the inventory for at least six years.

While activity in Southwest B.C.’s housing market remained robust in 2017, our real estate market is not expected to generate the same economic growth in coming years. Rising mortgage rates, increased cost of land and building materials, and uncertainty over the government’s action on housing affordability may cause fewer developers to announce new mega projects in the key urban centers of Southwest B.C.

Although diversified, our economy is still dependent on the resource sector as many of our economic activities are linked with other B.C. regions. As the province’s main export hub, many resource-related companies have their head office located here in Southwest B.C., while they operate in other parts of the province. Over the past two years, and in line with our region’s trend, the province has experienced a decline in major project investment. In 2017, five natural gas (LNG) projects in northern B.C. worth a combined value of $29.9 billion have been cancelled due to challenging market conditions. And while the recent news of Petronas interest in the LNG Canada project provides some renewed optimism to LNG projects in the province, it is still unknown if and when any LNG project will proceed.

Looking at venture capital investment, the Regional Check-Up report found that Vancouver attracted 77 venture capital deals in 2017 worth $513 million in 2017. Although small in comparison to major projects investment, it provides insight into investor confidence, and where dollars are being directed. While much of Canada’s venture capital activity continues to occur in Toronto and Montreal, Vancouver is slowly picking up. In 2017, two of the top 10 Canadian disclosed venture capital deals were in Vancouver: Vision Critical ($76 million) and Visier ($61 million).

As our tech sector continues to thrive, the bright spot for Southwest B.C.’s investment activity will likely remain in the venture capital market for 2018. The federal funding for B.C.’s digital super-cluster, and Amazon’s announcement to revamp the old post office in Downtown Vancouver and create 3,000 jobs supports the region’s tech eco-system and will likely draw more tech companies and create spin-off activities for local businesses.

Lori Mathison, FCPA, FCGA, LLB is the president and CEO of the Chartered Professional Accountants of British Columbia (CPABC). The CPABC Regional Check-Up report is available online at: www.bccheckup.com.